Research Credit

For the past 40 years the research and development (R&D) tax credit has been a powerful tax incentive to reward companies for creating, improving or advancing processes or products.

Although larger corporations are well aware of the advantages offered by the R&D tax credit, many smaller companies overlook or don’t understand how they can be eligible to claim the tax credit based on activities already performed in their day to day operation.

Regardless of your company’s size or industry, your company may qualify for R&D tax credits if you are performing activities that meet the following four tests:

Permitted purpose – the purpose of the research must be to create a new or improved product or process, resulting in increased performance, function, reliability or quality. This activity does have to be new to your industry, instead it can be innovative or new to your company’s processes or products.

Technological in nature – the research performed must fundamentally rely on the principles of physical science. The process of experimentation must rely on the hard sciences, such as engineering, physics, chemistry, biology, or computer science.

Eliminate uncertainty – the activity undertaken must be intended to discover information to eliminate uncertainty concerning the capability or method of development or improving a product or process.

Process of Experimentation – Your research should demonstrate a process of experimentation through modeling, simulation, systematic trial and error or other methods the evaluation of alternatives to achieve the desired result.